Summary

Big picture: China has built dominant positions across multiple supply chains and has shown it can leverage that power—beyond rare earths—to pressure trading partners. Its playbook: decades of industrial policy to scale and undercut prices, then targeted export/tech controls once dominance is secured. Xi has said supply-chain control shouldn’t be weaponized, yet also urged tightening other countries’ dependence on China.

Recent trigger and precedent:

China constricted rare-earths flows, prompting U.S. negotiations; a Trump–Xi truce aims to ease those exports.

When China blocks a single key supplier, downstream industries can be hit within weeks.

Sector 1: Lithium-ion batteries (EVs, energy storage, electronics)

Market power: Top global cell makers include China’s CATL and BYD; even non-China-made batteries often rely on Chinese components.

Supply-chain choke points (Benchmark Mineral Intelligence): ~79% of cathodes, 92% of anodes, 63% of refined lithium, 80% of refined cobalt, 98% of refined graphite come from China.

Policy tools and controls: After promoting EVs and local batteries (notably from 2015), China in 2025 required licenses for certain battery tech transfers (July) and export licenses for some manufacturing equipment and cathode materials (October) to prevent tech leakage and preserve advantage.

Sector 2: Semiconductors (mature nodes)

Capacity: China accounts for about one-third of global mature-chip fab capacity—vital for autos, consumer electronics, and defense.

Critical inputs: China produced 99% of global gallium in 2024 and is the leading producer of germanium—both essential for chips and photovoltaics.

Leverage in action: China imposed export licensing on gallium and germanium (2023). It also blocked export of Nexperia mature chips processed/packaged in China after the Dutch government seized control of the firm from a blacklisted Chinese parent; automakers like Honda faced factory shutdowns within weeks. Following Trump–Xi talks, China let shipments resume—highlighting how quickly disruptions bite.

Structural risk: Heavy Chinese investment raises concerns of overcapacity that could squeeze rivals’ margins and drive them out.

Sector 3: Pharmaceuticals (APIs and precursors)

U.S. dependence: Most U.S. imports of acetaminophen and ibuprofen come from China; China is a significant source of antibiotic ingredients. India supplies many generics, but frequently relies on Chinese APIs.

Policy trajectory: Since 2015, China has prioritized medicines/medical devices and plans further support for innovative products.

Signaled leverage: Early in the Covid-19 pandemic, state media hinted at the impact of restricting medical exports amid PPE shortages.

Cross-cutting insights

Once Chinese firms dominate upstream/refining and key midstream steps, alternatives often exist only at higher cost—or are hard to find at all.

Export controls, licensing, and tech-transfer barriers are used selectively to retaliate or protect industrial leads, amplifying the geopolitical stakes of commercial dependencies.

Implication for the U.S.: Reducing vulnerability would require diversifying and rebuilding supply chains across batteries, mature chips, and pharmaceuticals—areas where China currently holds decisive processing, component, or input advantages.
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Content

CATL's Jianxiawo lithium mine in Yichun, Jiangxi province, China, showing terraced mountains covered in blue-green netting with buildings at the base.

CATL’s Jianxiawo lithium mine in Yichun, Jiangxi province, China, showing terraced mountains covered in blue-green netting with buildings at the base.

A lithium mine in Jiangxi province, China. The nation has a significant hold on the supply of lithium-ion batteries.Gilles Sabrie/Bloomberg News

China can weaponize its control over global supply chains, notably in rare-earth minerals, lithium-ion batteries, mature chips, and pharmaceutical ingredients.
Chinese suppliers produce 79% of battery cathodes, 92% of anodes, 63% of refined lithium, 80% of refined cobalt, and 98% of refined graphite.
China accounts for about one-third of global mature semiconductor production capacity and 99% of global gallium production in 2024.

An artificial-intelligence tool created this summary, which was based on the text of the article and checked by an editor. about how we use artificial intelligence in our journalism.

China can weaponize its control over global supply chains, notably in rare-earth minerals, lithium-ion batteries, mature chips, and pharmaceutical ingredients.
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BEIJING—China has demonstrated it can weaponize its control over global supply chains by constricting the flow of critical rare-earth minerals. President Trump went to the negotiating table when the lack of Chinese materials threatened American production, and he reached a truce last week with Chinese leader Xi Jinping that both sides say will ease the flow of rare earths.

But Beijing’s tools go beyond these critical minerals. Three other industries where China has a chokehold—lithium-ion batteries, mature chips and pharmaceutical ingredients—give an idea of what the U.S. would need to do to free itself fully from vulnerability.

Behind China’s supply-chain dominance lie decadeslong industrial policies.

Once Chinese companies have come to dominate a wide stretch of the supply chain, flooding global markets with lower-priced products in the process, Beijing brings in export controls that allow it to leverage its advantage and impose pain or threaten rival economies. Sometimes countries can procure alternatives at higher cost, but in other cases it is hard—or nearly impossible—to find suppliers outside China.

In a 2020 essay, Xi said supply-chain control shouldn’t be weaponized, yet he also said China must “tighten the dependence of international industrial chains on our country” to deter others from hurting China.

Here is a guide to China’s playbook for flexing its export muscle.

Lithium-ion batteries

Lithium-ion batteries are used in electric vehicles, energy storage and consumer electronics. Whoever controls them has an edge in automotive technology and green energy.

The top two global battery producers are Chinese: CATL and BYD. Even when a battery is made elsewhere, its innards include a significant Chinese contribution. Chinese suppliers produce 79% of the cathodes inside batteries and 92% of the anodes, according to Benchmark Mineral Intelligence. The batteries also use materials such as lithium, where Chinese producers have a 63% market share for the refined chemical version. China also controls 80% of the supply of refined cobalt and 98% of refined graphite.

In 2015, Beijing declared a goal of expanding its homegrown EV industry, which opened the floodgates for hundreds of local carmakers and battery makers. Between 2015 and 2019, Beijing encouraged Chinese EV makers to use approved locally made batteries.

This year, China has taken steps to keep its chokehold by ensuring its technology doesn’t leak to rivals. In July, Beijing said it would require licenses to transfer certain technologies linked to lithium-ion battery manufacturing overseas, and in October it started requiring export licenses for certain manufacturing equipment and cathode materials.

Semiconductors

China now accounts for about one-third of the globe’s mature semiconductor production capacity. These chips are still critical for industries including cars, consumer electronics and defense, even though they are easier to produce than cutting-edge chips.

Meanwhile, minerals such as gallium and germanium are widely used in chips—both advanced and mature—and other semiconductor products such as photovoltaic cells. China accounted for 99% of global gallium production in 2024, data from the U.S. Geological Survey showed. China is the world’s leading producer of germanium, USGS said, without giving exact numbers.

China has spent billions of dollars to build semiconductor manufacturing capability with a view toward self-sufficiency. That has triggered concerns globally about Chinese overcapacity in mature chips, which could push down the profitability of other producers and ultimately drive them out of the market.

China in 2023 announced export restrictions on gallium and germanium, requiring licenses for foreign shipments.

Recently, China blocked the export of mature chips made by a Dutch company called Nexperia that are used in car lights and electronics. The chips are largely manufactured in Europe but ultimately get exported to the world from China, where processing and packaging take place.

China said it blocked those exports as retaliation after the Dutch government seized control of Nexperia from its former Chinese parent, which is on a U.S. trade blacklist.

Following the Trump-Xi talks last week, China said it would let the Nexperia chips flow to global customers again. Still, the case showed the consequences that result when a single relatively modest-size mature chip maker can’t sell its products. Global automakers such as Honda had to shut down factories within weeks of China’s move.

Pharmaceuticals

While drugs sold in U.S. pharmacies or over the counter typically don’t say “made in China,” the country often supplies active pharmaceutical ingredients in the drugs or precursor chemicals used to make those active ingredients.

Most of the acetaminophen and ibuprofen imported into the U.S. comes from China. Those are the active ingredients in Tylenol and Advil, respectively. China is also a significant producer of antibiotic ingredients.

The U.S. imports many branded drugs from Europe, while for generics, it relies heavily on India. Still, a significant amount of the active ingredients used in India-made generics originates in China.

In 2015, China made production of medicines and medical devices an industrial priority. More recently, China said it plans to support development of innovative medicine and medical devices in the next five years.

Perhaps aware of the sensitivity of turning medicine into a political tool, China hasn’t often threatened to cut off drug supplies to the U.S. Still, it signaled awareness of its leverage early in the Covid-19 pandemic, when the world faced shortages of masks and personal protection equipment owing to supply disruptions from China. In March 2020, the official Xinhua News Agency said that if China were to restrict exports of medical goods, the “U.S. will be plunged into the vast ocean of coronavirus.”

Write to Yoko Kubota at yoko.kubota@wsj.com

Appeared in the November 5, 2025, print edition as ‘How China’s Chokehold On Drugs, Chips and More Threatens the U.S.’.

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